Fed Moves To Create Frightening Hyperinflation In The U.S.

Barron:  “We have seen gold rally off the lows after the Fed news.  With the current reckless policies in place we should be seeing the largest boom in recorded history going on right now in America.  It just shows how dire the situation is that even with throwing all of this gasoline on the fire, all they can manage is a stagnant economy.

But aside from the meaningless Fed comments, demand for physical gold is still very strong, especially from Asia.  In fact, the sovereign buyers are shoveling up all of the available physical gold as fast they can…

The last time I checked with the refiners they were producing small bars as fast as possible for the Indian market.  Since then the Indian government has clamped down on gold imports, but it doesn’t matter because people are just smuggling the gold into India anyway.  The other thing the Indians have historically done in this situation is to buy physical silver.

But getting back to what is happening in the United States, the reality is that the Fed is going to be forced to dramatically increase the amount of stimulus being pumped into the economy over time.  Right now the Fed buys $85 billion of Treasuries each month.  I expect to see that number dramatically increased, and it will cover stimulus at some point, as well as Treasury purchases.

So including the additional stimulus that will come from the Fed, I expect to see that $85 billion monthly figure increase to $170 billion, and eventually to $420 billion.  This is because the already dire economic situation in the United States is going to deteriorate considerably from here.

Central planners are really running out of ammunition at this point, aside from additional money printing.  Eventually the situation with the money printing will get away from them and at that point inflation will really begin to soar.”

Eric King:  “Keith, you stated that you believe the Fed will increase the money printing a remarkable 500% from current levels, taking the monthly printing to $440 billion.  What will that environment look like?”

Barron:  “Let me address gold specifically:  The price of gold is going to go through the roof.  It can take a while for hyperinflation to get going, but if you really work hard at it you can make it happen pretty fast.

In the Weimar Republic in Germany they started printing in a big way in 1919.  By 1923 it was game over.  Then they lopped 12 zeros off of that currency and came up with a new one.  The only reason that inflation ended was because everyone was so exhausted and the money was completely worthless.

So the Germans ditched one currency for another one called the Rentenmark.  It was actually backed by the commodity rye, which is used to make rye bread.  It’s surprising that the currency was accepted, but it just shows you that the people were so exhausted by the hyperinflation that they were desperate to try anything.  By that time all of Germany’s gold had been largely consumed.  There was, however, a tiny amount of gold that went toward backing the Rentenmark.

We will see something similar happen in the United States in terms of an eventual hyperinflation.  People don’t believe it can happen in the U.S., but it’s already happened twice in American history.  The currency became worthless under the Continental Congress, and it happened again in the American Civil War (on both sides).

There is no reason why it can’t happen again in America, and I am telling you it will happen again.  We’ve seen it take place in modern, sophisticated countries such as France and Germany.  It doesn’t just happen in Latin American banana republics.  For investors looking to protect themselves from the coming carnage, they must own physical gold and the quality companies that produce gold.  Sadly, people sitting in other forms of paper will see massive wealth destruction.”